The Australian dollar jumps to a 3-week high as the greenback rally wilts

The Australian dollar continued to climb in overnight trade, boosted by a rebound in the Chinese yuan and soft US labour market data ahead of tonight’s key US non-farm payrolls report for December.

But it actually underperformed against the crosses.

Here’s the scoreboard as at 7.50am AEDT.

AUD/USD 0.7339 , 0.0056 , 0.77%

AUD/JPY 84.8 , -0.54 , -0.63%

AUD/CNH 4.9775 , -0.0208 , -0.42%

AUD/EUR 0.6926 , -0.0013 , -0.19%

AUD/GBP 0.5913 , 0.0007 , 0.12%

AUD/NZD 1.0448 , 0.0003 , 0.03%

As seen in the 5-minute tick chart below, the move in the AUD/USD kicked off in Asia yesterday, bolstered by a rebound in the offshore traded yuan that was almost certainly sparked by renewed intervention by the People’s Bank of China to curb speculative pressures that had seen the yuan weaken sharply in recent weeks.

The move in the yuan saw the US dollar weaken across the board, and dragged the Aussie higher as a consequence.

As a result, the AUD/USD jumped to a session high of .7356 before easing lower late in the North American trade.

AUD/USD 5-Minute Chart

Turning to Friday trade in Asia, movements in the offshore traded yuan, or CNH, will almost certainly dictate movements in the US dollar, hence movements in boarder currency markets.

In particular, there may be increased volatility around the USD/CNY fix at 12.15pm AEDT given the selloff in the US dollar overnight.

Before that event arrives, there may also be passing interest in Australia’s November trade report releases at 11.30am AEDT with the trade deficit expected to narrow sharply given some substantial gains in the nation’s key commodity export prices late last year.

A deficit of $500 million is expected, less than a third of the $1.541 billion level reported in October.

After those events, the calendar thins out ahead of the US non-farm payrolls report for December, due to be released at 12.30am AEDT on Saturday.

According to a survey of economists conducted by Reuters, payrolls are tipped to increase by 178,000.

The unemployment rate is expected to tick up to 4.7% from 4.6% with average hourly earnings tipped to increase by a further 0.3%.

Outside of the payrolls report, markets will also receive US trade figures, Canadian unemployment and trade data, retail sales and consumer confidence from the Eurozone and German retail sales, among others.

At the margin they may influence movements in the Aussie, although, as usual, direction will almost certainly be dictated by the composition of the US payrolls report.